EFTA 4 UK: Why joining the European Free Trade Association would be better for the UK than EU membership

Guest Blogger, 26 April 2016

The question before us is this – will the UK be better or worse off after Brexit – and how will the EU react to us leaving? Some of these fears can be negated by reading the text of EU Article 50, which specifies that:

“Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements…the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union.”[i]

So according to article 50, some kind of agreement will be concluded with the UK. But will this agreement be a fair or favourable one? To discover that we need to read Article 8 of the amended treaties.

Article 8

Article 8 states:

“1. The Union shall develop a special relationship with neighbouring countries, aiming to establish an area of prosperity and good neighbourliness, founded on the values of the Union and characterised by close and peaceful relations based on cooperation.”[ii]

When we take these articles into consideration, (which are part of EU law) the fear is logically lessened. When we factor EFTA into the equation, it diminishes still.

The UK has a bright future outside of the EU – in EFTA the European Free Trade Association[iii] created in 1960, whose creation was inspired and directed by the UK, a founder member.

According to the EU website, EFTA member Switzerland is “the EU’s 4th largest trading partner”.[iv]

If the UK were to rejoin, we would likely be the EU’s largest trading partner – giving the recombined EFTA bloc substantial negotiating influence in EU capitals.

Trade deals

The EFTA States have 25 free trade agreements (covering 36 countries) including Canada.

Now, critics will undoubtedly say that the EU has trade deals with over 50 countries, which is true. But consider this:

The EFTA trade deals contain accession clauses so that any state joining EFTA accedes to them unless the third party in question specifically objects to them.

An example is in the Canada agreement:

“ARTICLE 39 Additional Parties

The Parties may invite any State to become a Party to this Agreement. The terms and conditions of the participation by the additional Party shall be the subject of an agreement between the Parties and the invited State.”

Or in the Hong Kong agreement:

Accession

Any State becoming a Member of the European Free Trade Association may accede to this Agreement, provided that the Joint Committee approves its accession on terms and conditions to be agreed upon by the Parties. The instrument of accession shall be deposited with the Depositary.

In relation to an acceding State, this Agreement shall enter into force on the first day of the third month following the deposit of its instrument of accession, or the approval of the terms of accession by the existing Parties, whichever is later.”

We believe that few of the 36 countries (if any) will object to the UK becoming party to these agreements, so most of these are a certainty.

And what about the agreements the UK has signed while part of the EEC/EC/EU?

There is an established principle in international law called presumption of continuity[v]which should allow the UK to continue these trade deals uninterrupted.

Precedents include the reunification of Germany, the separation of Czechoslovakia and the Hong Kong handover, where agreements signed by one nation or national entity were inherited after separation or substantial changes.

Now let’s say that some of the countries refuse this and don’t carry on as normal with the newly independent UK – but many probably will want to maintain the trade status quo.

Unlike EU membership, EFTA membership allows a state to have two sets of trade deals – ones negotiated by the state itself and others negotiated by EFTA as a bloc – hence Switzerland has a trade deal with China, but EFTA itself does not.

Where does that leave us? In all probability the UK will end up with a large number of trade deals – some via EFTA, others via Presumption of continuity which number more than any EU state.

If we join EFTA will we still have to pay?

Critics argue that if we leave and join EFTA we will still “have to pay”. That we might, but substantially less than as an EU member state, and the money will be spent in an entirely different way – essentially as foreign aid[vi] (so could come from the DFID budget) to poor EU states to ‘sweeten the deal’.

According to a House of Commons Library report:

“If the UK left the EU and instead contributed to the EU budget on the same basis as Norway, its contributions would fall by around 17%. EEA countries and Switzerland contribute to the costs of EU programmes in which they participate, and to programmes to reduce economic and social disparities within the Union. Norway, an EEA country, contributed around £106 per capita in 2011, while Switzerland contributes around £53 per capita. These figures are respectively 17% and 60% less than the UK’s per capita contribution of £128 in 2011.”[vii]

Even taking into account the cost of co-operating in schemes such as Erasmus and Europol, the UK should still see substantial savings each year, amounting to billions of pounds per annum.

In his 2012 book ‘Au Revoir Europe’ (pg 205) David Charter (former European Correspondent of The Times) stated: “If it can be inferred from this that the gross cost to the UK of a similar arrangement to Switzerland’s would be around one-eighth of Britain’s current £15 billion gross contribution, the annual cost would be £1.9 billion”

In his 2014 book ‘Europe: in or out?’ (pg 106) David Charter revisits this issue, stating that:

“Various attempts have been made to estimate the amount that Britain would be obliged to pay towards projects in the EU’s poorer states in return for continued access to the Single Market or Swiss-style bilateral trading conditions. In 2006, the Swiss Government estimated that EEA membership would cost 32 per cent more, while full EU membership could cost six times as much, after receipts from Brussels, based on a gross contribution increase of 786 per cent.

If it can be inferred from this that the UK would pay one-eighth of its overall fee to return to the EFTA relationship used by Switzerland, then the 2013 gross charge of £17.2 billion would be reduced to £2.15 billion, while the price of staying in the Single Market through the EEA would be about £2.8 billion a year.”

A multi-billion per annum drop in contributions would be a huge boost to the UK, although a large portion of this would still need to be spent in the UK in a similar way to how it is now – but crucially without EU interference.

If we join the EFTA will we still have to accept freedom of movement?

Critics argue that if we leave and join EFTA we will still “have to accept freedom of movement from EU states”. Ultimately that will be up to the UK’s negotiators to negotiate. We believe that the UK will be able to negotiate a deal that does not include unfettered freedom of movement.

The Swiss got a Free Trade agreement in 1972 that did not include freedom of movement, voluntarily signing up to a free movement agreement decades later, so there is a precedent.

But since we already have to accept freedom of movement as an EU member state, we would certainly be no worse off than we are now – since the existing Norwegian and Swiss models contain many caveats, restrictions, levers and emergency brakes that we currently do not possess.

It is also worth bearing in mind that unlike current EFTA states the UK would not sign up to the Schengen area.

Will we be isolated?

Critics argue that if we leave and join EFTA we will “be isolated”. Which is patently untrue, as we will still be members of the UN, the Council of Europe, U.N. Economic Commission for Europe (UNECE), Organization for Security and Co-operation in Europe (OSCE) and dozens of other international bodies and fora. Also, parliamentarians from the EFTA states have regular meetings with MEPs and officials from the EU.

Will we have any say over the rules?

Critics argue that if we leave and join EFTA we will still “have to obey EU rules”.

Let’s be clear – the EU has very little influence over EFTA states.

The EFTA states are exempt from most of the contentious EU policy areas[viii] such as:

Common Agriculture and Fisheries Policies

Customs Union

Common Trade Policy

Common Foreign and Security Policy

Justice and Home Affairs

Monetary Union (EMU)

The areas in which the EU does have control are largely those to do with the single market, product standards and regulations. In many cases these rules are simply European interpretations of standards agreed at regional or global standard-setting bodies.

Leaving the EU means the UK would have greater influence on these global bodies, as our vote and voice would not be constrained by Article 34 of the EU treaties.[ix] A notable example of this is the World Trade Organisation or WTO – Norway and Switzerland speak for themselves there, while the EU trade commissioner speaks for the UK on this body.

This destroys the argument that leaving the EU would take away our voice at the “Top table” – in fact it would restore our place there.

Summary

A return to EFTA would leave us financially better off, and with more say over our own affairs. As one Eurosceptic MEP recently wrote:

“To summarize then, Norway gets a better deal than Britain currently does, and Switzerland a better deal than Norway. But a post-EU Britain, with 65 million to Switzerland’s eight and Norway’s five, should expect something better yet.”

-Dan Hannan MEP from his book ‘Why vote Leave’-

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5 comments on “EFTA 4 UK: Why joining the European Free Trade Association would be better for the UK than EU membership”

It seems to me, this is the way to go. It’s almost ideal for the UK – we were an EFTA founder member, and looking back we probably should have stuck with it anyway. It gives us the trade we want, it insulates us from the EU’s political chicanery, and it’s cheaper too!

With a return to our seats on the WTO and other international bodies, I believe we’d have more influence in Europe, not less, since many EU laws are made at the WTO level! i.e. It’s a myth the EU is the “top table.”

Plus, many Brits genuinely like and respect the EFTA states, and I think we’ll be right at home in this merry band of self-assured non-conformists. It is that awkward British propensity for freedom-of-thought that irks the EU, and I just don’t see that being a problem in EFTA.

As if all that weren’t enough, pro-Europeans can be pleased that we’ll not be “leaving Europe” – we can still participate in Europe-wide projects, we can still retire to Spain, we can still go through a slightly faster lane at the airport. It even has the word “European” in the name (if you like that sort of thing).

So I see a kind of win-win-win-win for everyone here: eurosceptics get out of the EU, europhiles get to stay “in Europe”, EFTA gets one of its big players back, and the EU gets rid of its most reluctant member.

EFTA Switzerland runs its financial services from EU London. Neither the EFTA nor Switzerland’s bilaterals provide for passporting rights for its banks. Where will EFTA London run its financial services from? What impact will either moving them somewhere else, or incurring costs have on them/us?

> Critics argue that if we leave and join EFTA we will still “have to accept freedom of movement from EU states”.

What critics argue is that you may not participate in the EU’s single market without freedom of movement. EFTA Norway, Iceland and Liechtenstein have joined the EEA to participate. EFTA Switzerland signed a mess of treaties to participate, that include freedom of movement.